Custom, Excise & Service Tax Tribunal
M/S. Kcp Ltd vs Cce, Chennai I on 21 September, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/41740 & 41741/2014
(Arising out of Order-in-Original No. 8/2014 and 9/2014 both dated 29.4.2014 passed by the Commissioner of Central Excise, Chennai I)
M/s. KCP Ltd. Appellant
Vs.
CCE, Chennai I Respondent
E/41742 to 41761/2014 (Arising out of Order-in-Original No. 11 to 30/2014 dated 29.5.2014 passed by the Commissioner of Central Excise, Chennai I) M/s. KCP Ltd. Appellant Vs. CCE, Chennai I Respondent Appearance Shri S. Manickam, Advocate for the Appellant Shri B. Balamurugan, AC (AR) for the Respondent CORAM Honble Shri D.N. Panda, Judicial Member Honble Shri R. Periasami, Technical Member Date of Hearing / Decision: 18/21.09.2015 Final Order Nos. 41389-41410 / 2015 Per D.N. Panda This batch of appeals came up before the Bench on 18.9.2015. Those were heard in length. Due to paucity of time order could not be recorded for which matter was adjourned to 21.9.2015. For the common cause of action involved in all these appeals, those are heard analogous and disposed by this common order.
2. In the present batch of 22 appeals, two appeals registered as E/41740/2014 and E/41741/2014 arose out of re-adjudication orders numbered by the adjudicating authority as Order-in-Original No. 8/2014 and 9/2014 both dated 29.4.2014 made pursuant to the judgment of the Apex Court in KCP Ltd. Vs. Commissioner of Central Excise, Chennai in Civil Appeal No. 5509 and 5510/2013 decided on 3.9.2013 and reported in 2013 (295) ELT 353 (SC) upholding order of Tribunal reported as 2003 (161) ELT 589 (Tri. Chennai). These two appeals also relate to the period July 1994 to January 1996 covered by denovo orders No. 8/2014 and the period August 1996 to January 1997 covered by the Order No. 9/2014. Elaborate argument having been made by both sides on these two appeals, those are taken up first to deal in detail for appreciation of common cause in all the appeals and result thereof applied to other 20 appeals having arisen out of similar cause of action and argument made in these two appeals adopted by both sides for those appeals.
HISTORY OF THE CASE 3.1 Honble Supreme Court dismissed civil appeals of the assessee preferred against the Final Order No. 301/2003 dated 2.5.2003 of the Tribunal reported in 2003 (161) ELT 589 (Tri. Chennai) without interference. While dismissing the appeals, Apex Court noticed that the appellant was manufacturer of certain machines in its own factory and those were exported to Vietnam for setting up sugar plant thereat. While the manufactured machines were exported, certain other equipments purchased from outsiders were also exported without using the same in manufacture nor even unpacking or unwrapping the said goods. The appellant availed MODVAT credit on those bought out items exported under Rule 57Q of Central Excise Rule, 1944 declaring that as capital goods (para 4 of the judgment). On such fact, Revenue denied that MODVAT credit on such goods to the appellant on the ground that those were not capital goods although the appellants declared that to be so.
3.2 Original adjudication made by order No. 15/97 dated 26.5.1997 resulted in dropping of the proceeding. But that was reviewed by the CBEC as has been elaborately recorded by Tribunal in pra 6 of its decision reported as above. In the said para Tribunal also recorded that the earlier two proceedings made against the appellant prior to present two readjudiation proceedings were for different periods issuing show-cause notice dated 1.1.95 and 17.1.95 disposed by common Order-in-Original No 47/95 dated 26.5.95 on different issue without the issue of availing of MODVAT credit on the goods exported without use thereof in manufacture, involved therein.
3.3 Apex Court held in para 19 of the reported judgment that the Tribunal had rightly come to the conclusion that the appellant was not entitled to MODVAT credit as prayer for. In para 21 of the judgment, the modality how MODVAT credit is allowed was dealt. In para 22, the Honble Court observed that no duty was paid by the appellant on the sugar plant that was exported and it had not used the bought out items in its factory premises for manufacturing the exported plant and machinery. In para 24 of the judgment, the Honble Court observed that it was not in dispute that the appellant had purchased some machinery from others and such machinery had not even been unpacked by it and in exact condition that was exported along with machinery manufactured by it. The Court came to the conclusion that the appellant did not use the purchased machinery in its premises or in its factory and thereby rule relating to MODVAT credit was not complied with. It was also held that the appellant had not even tested or unwrapped the bought out items and the appellant had only acted as a trader or as an exporter in relation to the machinery purchased by it. (Para 25 of the judgment).
3.4 At this juncture, it may be proper to state that CBE&C when directed the Department to seek appeal as has been recorded in para 2 of its decision by Tribunal in 2003 (161) ELT 589 (Tri. Chennai), the Board was conscious that the appellant was merchant exporter in respect of the goods supplied outside India.
4. On the aforesaid premises, when the order of the Tribunal was upheld by the Apex Court dismissing the civil appeal of the assessee, the direction of the Tribunal for re-computation of the MODVAT credit irregularly availed and penalty if any imposable was carried out by the learned adjudicating authority vide two re-adjudication orders No. 8/2014 and 9/2014 both dated 29.4.2014. Those two orders have been appealed before Tribunal by appellant in these two Appeals registered as Nos. E/41740 & 41741/2014.
ARGUMENTS OF APPELLLANT 5.1 Arguing on behalf of appellant, learned counsel Shri S. Manickam submits that the goods which were bought out were recorded in the statutory record. Some of such goods were inputs and some were capital goods and necessary declarations in that regard were filed before the jurisdictional Authority from time to time as per requirement of law and those were accepted by the Authority and such evidence is borne by public record. In respect of inputs, appellant recorded the MODVAT credit of the excise duty paid thereon under Rule 57F and Rule 57I of Central Excise Rules, 1944 (hereinafter referred to as the Rules) in the statutory record and availed the same which is verifiable from that record. So far as capital goods were concerned, the appellant also recorded the respective MODVAT credit of the excise duty paid thereon in terms of Rule 57Q of the Rules read with Rule 57S in its statutory record.
5.2 Learned counsel explained that under the earlier MODVAT scheme, input is specifically dealt by Rule 57F as to its manner of its utilization. Rule 57F (i) and (ii) dealt with export of the inputs purchased without being used and such export was allowed under bond. In such an event, Rule 57F (iii) applies. Removal of input without being used in manufacture was permitted by law for export. Those were accordingly removed by the appellant in compliance to the law. Appropriate declarations were filed by the appellant in this behalf before the authority below. Therefore, without any deviation to law, no allegation of any suppression or mis-statement of the fact can be made nor also levy of any penalty conceivable. In the event the inputs are exported, the manner of recovery of the MODVAT availed is prescribed by Rule 57I of the Rules. Respective MODVAT credit on the input so exported if not utilized is reversible and in the event that is utilized, that shall be recoverable.
5.3 It was further submitted on behalf of the appellant that so far as capital goods are concerned, the appellant satisfying the requirement of Rule 57Q has recorded the receipt of such goods in its statutory record under Rule 57S. Relevant MODVAT credit taken thereon is verifiable from the statutory record maintained. Law prescribed the manner how the capital goods MODVAT can be taken under Rule 57S. Like the reversion and recovery provision prescribed against wrong availment of CENVAT credit on inputs, Rule 57U has made provision in respect of MODVAT credit taken on the capital goods. According to appellant, there is no quarrel on the legal provision. But the assessee has all along suffered without a clear recognition and segregation of the goods recorded under Rule 57F and 57S of Central Excise Rules, 1944 in the statutory record. None of the authorities below at any time recognized so, for right application of law in that regard under Rule 57I and 57S. If segregation is made, then, right law can be applied distinctly under Rule 57F and 57I for the inputs recorded and law relating to capital goods credit under Rule 57Q, 57S and Rule 57U of the MODVAT Rules shall be applied. Therefore, for quantification of MODVAT credit taken on both types of goods is necessary following the law under concerned Rule and utilization of credit if any, is ascertainable. Hence, verification of statutory record shall result in proper application of law.
5.4 According to the learned counsel, if a thorough enquiry in above manner is made, that shall reveal the status of credit and utilization if any, thereof. When declarations were filed as to receipt of the input and export thereof, that rendered knowledge to the Department about its modus operandi since appellant did not make suppression of any material fact. In absence of any deliberate suppression and intention to cause evasion, part of the period in the proceeding covered by denovo order No. 8/2014 is time barred. This aspect needs thorough examination which was not done. There was mis-conception of fact and law by the authorities below. He fairly submitted that the Apex Court judgment has not dealt with the time bar aspect. But plea in that regard was before the Apex Court.
5.5 Learned counsel further specifically argued that learned adjudicating Commissioner in his Order-in-Original No. 15/97 dated 26.5.97 (Ref. pages 178 to 224 in appeal folder E/41740/2014) had dealt the time bar aspect and dropped the proceedings. This is very clear when para 56 thereof is read. The appellant was therefore under bonafide belief that time-bar aspect having been dropped by the learned adjudicating authority by the above order, there is no further dispute by Revenue thereon. When Revenue came in appeal against the above original order before Tribunal in pursuance to the direction of CBE&C, a cross objection was filed by appellant. Therefore, time bar being a matter of fact on record, there should not be any dispute by Revenue thereon. However, unfortunately, that did not receive the attention of the Apex Court while disposing the civil appeals aforesaid. He therefore prayed that if the matter goes back to learned Adjudicating Authority history of the declarations can be examined and the time bar aspect shall be appreciated by him as that was done in original order dated 26.5.1997 stated aforesaid since question of law can be raised and examined at any time during pendency of the matter.
5.5 It was further submitted on behalf of the appellant that there shall be no penalty at all for the reason that the penal provisions incorporated in Rule 57I and Rule 57U of the Rules in terms of sub-rule (4) in Rule 57I and sub-rule (5) in Rule 57U of the said Rules came into force with effect from 23.6.1996. Therefore, when there was no law on penalty at the material period, it is settled principle that there cannot be penalty against the appellant when there was no provision in that regard at the material period.
5.6 The appellant further submitted that if at all MODVAT credit on input and capital goods is alleged to have been wrongly availed the statutory record maintained for the said goods shall prove the extent thereof showing whether credit was merely availed or availed and utilized without having any credit over and above the same on record at the material period of utilization. This is purely matter of record for verification.
5.7 Appellant did not dispute the case on merit except to the extent argued as above. Plea of the appellant was that the finding in para 6 of the reported decision of the Tribunal is on the erroneous premises that the plant and machinery were immovable in character. On such erroneous premise, Tribunal came to the conclusion that there was no capital goods. He relies on the decision of the Honble Supreme Court in the case of Sirpur Paper Mills Ltd. Vs. Collector of Central Excise, Hyderabad 1998 (97) ELT 3 (SC) to submit so.
ARGUMENTS OF REVENUE 6.1 Revenue on the other hand submits that when the appellant successively failed before Tribunal and also before the Apex Court, there is no further scope for the appellant to argue before Tribunal on any aspect of the matter. Honble Supreme Court having dismissed the civil appeal of the assessee holding that there cannot be interference to the decision of the Tribunal that means both on fact and law the assessee fails to argue before Tribunal today against the order which has given effect to the order of the Tribunal reported in 2003 (161) ELT 589 (Tri. Chennai).
6.2 It was also submitted by Revenue that the bought out goods were not capital goods. Therefore, that may be only input. Once input is not used in the manufacture, there is no question of grant of MODVAT credit. Learned adjudicating authority in the denovo order has rightly demanded duty from appellant with consequence of law spelt ordered. It was also submitted that the assessee has utilized the MODVAT credit wrongly availed for which they are to be penalized and interest is to be recovered from them including the MODVAT credit recoverable.
7. Heard both sides and perused the records.
FINDINGS AND CONCLUSION OF TRIBUNAL 7.1 We are in full agreement with Revenue on the point that the matter has reached its finality by the decision of the Apex Court as reported in 2013 (295) ELT 353 (SC) and order of Tribunal reported in 2003 (161) ELT 589 (Tri. Chennai) has merged therein. Material facts of the case as has been noticed by the Apex Court has been recorded in different paragraphs of the reported judgment. Only one thing that comes up for consideration is whether the appellant has maintained any record under the law to show the nature of goods bought out and filed before statutory authority in that regard. Tribunal had directed in its order to compute the irregular MODVAT credit availed. This implies that the MODVAT credit relating to input as well as capital goods is to be ascertained in accordance with law for right application of law. We are not able to see from record whether the goods are capital goods or input since the appellant is held to be trader of the bought out items by the Apex Court in para 25 of the reported judgment.
7.2 CBE&C while permitting filing of appeal had observed that the appellant was a merchant exporter as is apparent from para 2 of the reported decision of the Tribunal. Be that as it may, if the bought out goods have entered into statutory record as is pleaded by learned counsel either as input or capital goods that needs verification to segregate and ascertain value of each type of goods and MODVAT credit availed on each such category of goods can be ascertained for proper application of law in Rule 57F and 57I as well as Rule 57S and 57U of MODVAT Rules. Since the exercise expected by Tribunal from Revenue while passing final order as reported above was to apply Rule 57A, 57F and 57I and Rule 57Q, 57S as well as 57U of the Central Excise Rules, 1944 to the given case, it would be fair for Revenue to segregate the credit recorded under Rule 57F and Rule 57S of the Central Excise Rules, 1944 respectively for the material period to apply law relating to the recovery under Rule 57I and 57U as well as applicability of penal provision if any under Rule 57I and 57S of Central Excise Rules, 1944. Therefore, adjudicating authority is directed to afford reasonable opportunity of hearing to the appellant within three months from the receipt of this order for segregation of the input credit and capital goods credit if any availed verifiable from statutory record and verify the concerned declarations filed in that regard before the jurisdictional authority. If such detailed exercise is done, the authority may precisely work out the respective credits for applicability of the law distinctly appearing in two different Rules i.e., Rule 57I and Rule 57S of the Central Excise Rules, 1944.
7.3 It was brought to the notice of the Bench by the learned counsel that there was sufficient amount of input and capital goods credit in the statutory record of the appellant and there was no utilization of credit availed in respect of bought out items exported. This being a matter of record, such plea shall be examined by the adjudicating authority to ascertain the quantum of the credit utilized by the appellant for the reason that Rule 57I and Rule 57U intend to disallow unutilized credit and utilized credit to be recovered. Accordingly, there shall be recovery of utilized credit with interest thereon in accordance with law.
7.4 So far as the allegation of violation of Rule is concerned, we noticed that the penal provisions in Rule 57I through sub-rule (4) and in Rule 57U through sub-rule (5), were incorporated after 23.6.1996. This being the cut-off date there shall be no penalty for the period prior to that date is leviable in the course of re-adjudication under Rule 57I and Rule 57U respectively. If any other penal provision is attracted, appellant is entitled to reasonable opportunity of defense before imposition if any. After hearing the assessee extensively on the above aspects as directed above, appropriate reasoned and speaking order shall be passed by the learned adjudicating authority.
7.5 So far as time-bar is concerned, we understand the difficulties expressed by the appellant that because it succeeded on that count before adjudicating authority in original adjudication, there was no necessity to argue on the same point before Tribunal. But we are helpless when neither there was any plea in this regard before the Tribunal nor there was decision by the Apex Court on that aspect. Therefore subscribing to the view advanced by the appellant is not possible at this stage after the order of Tribunal merged in the order of Apex Court. Accordingly, time bar plea is rejected.
7.6 Appellant lastly pleaded that it is entitled to rebate. But such plea fails when the inputs were not used in manufacture but were exported as traded goods and even unpacking the same but dispatched as was received from suppliers. Appellant also pleaded that the appellant being found to be merchant exporter by the CBE&C in its review direction, the authority below in the course of readjudication may consider the benefit available to appellant in that regard. We do not consider any such benefit shall be available which was not the claim of appellant till today.
7.7 Since plea of purchase of capital goods came before us we make it clear that the goods were only conceived by appellant as capital goods without being installed by the appellant in its factory nor used in manufacture since those were not even unpacked as has been recorded by Apex Court. Therefore, learned adjudicating authority shall also examine whether any depreciation was claimed by appellant on the bought out claiming to be capital goods. If claimed that shall be dealt in accordance with law.
7.8 We make it clear that our decision on the re-adjudicated order No. 8/2014 and 9/2014 dated 29.4.2014 appealed is within the four of the Apex Court judgment. We hope that the appellant shall cooperate with the adjudicating authority producing the statutory record and copies of declaration for his verification and segregate the goods supported by declarations verifiable from statutory record as directed herein before. The authority granting fair opportunity of hearing shall within three months from the last date of hearing shall pass appropriate order.
7.9 The appellant is also directed to make an application to the adjudicating authority to fix the hearing as soon as it receives the copy of this order and provide all mathematical calculations as well as evidence in support of its calculation for the convenience of examination by learned adjudicating authority without seeking any adjournment.
7.10 It came to our notice that when the stay applications were heard in the present two appeals, there was a direction for predeposit of an amount of Rs.1,40,36,960/-. The appellant shall not claim any refund of this amount till the result of re-adjudication. This direction is applicable to these two appeals as well as other batch of appeals came up today and disposed by this common order.
E/41742 to 41761/20148. In the course of hearing we were given to understand that issue as that was involved in the aforesaid two appeals are also involved in other 20 appeals registered as E/41747 to 41761/2014. Three appeals which are registered as E/41743, 41744 and 41745/2014 were not listed today. On mention, these records were called from Registry and it was confirmed by the assessee that these appeals are also on the similar plane like other appeals in the above batch of twenty appeals. Both sides agreed to dispose these 20 (twenty) appeals commonly by this order. The issue dealt in preceding paragraphs having been settled by Apex Court in the reported decision and both sides having adopted their argument as recorded herein before, our findings and directions on these appeals is same as aforesaid in the two appeals disposed as above. These twenty appeals are also remanded with the directions and observation as above.
9. Learned counsel says that Order-in-Original No. 11/2014 dated 29.5.2014 has overlapping demand which arose out of Order-in-Original No. 8/2014 dated 29.4.2014. This factual aspect shall be examined by the adjudicating authority in the course of adjudication. We also make it clear that in this batch of appeals, the order relating to predeposit passed as stated above, shall equally apply and no refund shall be granted to the appellant till the result of re-adjudication.
10. In the result, all the 22 (twenty two) appeals are disposed of in the manner indicated against each batch of appeals.
(Dictated and pronounced in open court)
(R. PERIASAMI) (D.N. Panda)
Technical Member Judicial Member
Rex
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